When times are difficult, uncertainty reigns and employees get nervous. Will they have a job tomorrow? Will they have a company tomorrow? A leader's job is to tell the unvarnished truth and rid their organizations of the fear of the unknown. The news may not always be good, but your people need to understand what's going on so they can deal with it.

Some people think of the truth in relative terms—that there are varying shades of truth and truth telling, tempered by the purpose for telling it, and the anticipated result when it is told. As a result, some leaders shy away from telling their people the hard truth. Why? I can only guess that some are perhaps concerned that employees can't be trusted with it, or that they will be upset when confronted with the facts, or maybe even that they will leak the information to competitors or to the press.

In my experience, this is one of the biggest mistakes a leader can make.

I think that the greatest fear we all have, one everyone has to some degree, is fear of the unknown. When you're home alone at night and you hear an unexplained noise, the natural reaction is to be uneasy until you can determine what the source of the noise was. Similarly, in business, it's human nature for people to have concerns or worries when, for example, your company was just purchased or has merged with a larger competitor. And if the issue is left unexplained, these concerns and worries can become debilitating to people and to the organizations in which they work. In the wake of massive organizational change or disruption employees wonder about all kinds of possibilities, including, “What's going to happen with my company?” or, “What's going to happen with my job?” or, “What's going to happen with me?”

This kind of worry is completely rational—and often not unfounded. When mobile-communications provider T-Mobile USA began to execute its merger with MetroPCS, it announced in April 2013 a series of layoffs that quietly deleted up to four hundred of the company's highest-paid positions from the marketing and operations group of its Seattle-area headquarters. This took place soon after the company laid off more than forty-two hundred call center and other workers earlier in the year. And in March 2013, First California Bank announced that it would lay off fifty-five of its headquarters employees as a direct result of its acquisition by PacWest Bancorp, with other layoffs expected in areas where the two banks have overlapping branches.

Companies going through times of difficulty or change may unintentionally spark fear within their people, creating an environment where employees are worried about their future.

Summed up, these examples describe the fear of the unknown. This type of employee concern can wreak havoc. Like a particularly aggressive flu, it can spread quickly—not just within the company but also to suppliers, customers, and others. A leader has the responsibility to the company and employees to eliminate uncertainty as quickly as possible or be ready to deal with the consequences. And these consequences can be costly for the future of the organization. Effective leaders should be on the lookout for sign of fear on the faces of people who feel they may be at risk and immediately take action to do something about it.

The Fear

If people are fearful of the unknown, their production, their energy, and the company's morale will all plummet. It's a natural consequence of uncertainty in the workplace. That's not good for an organization or for its customers. In the extreme, such fears can lead to anxiety disorders, which, according to the late Jerilyn Ross of the Anxiety Disorders Association of America, “all involve irrational, seemingly uncontrollable and frightening thoughts, which often results in avoidance behavior. And in all cases, the person with the disorder is fully aware that their behavior is irrational. . . . What's more, in most cases the disorder impairs the person's normal functioning.”

As a leader, what do you do? How do you resolve this uncertainty, and this fear?

Believe it or not, the most effective way to rid an organization of fear of the unknown is simple: tell people the truth. Sounds too easy, doesn't it? Maybe it does, but telling the truth is often easier said than done for many leaders. It's not that they want to lie or tell untruths—it's just that they don't think their people or their organizations or their stakeholders are ready to hear the truth just yet. Indeed, they may be fully committed to telling the truth—when they think the time is right.

I have discovered through my own leadership experiences over the years that people can deal with the truth. Even when it's not good news, when they know what's going on, understand how the situation may affect them, and grasp what they're up against, most will start to adjust and make plans. In other words, the negative energy created by worrying is replaced with positive, productive actions and attitudes.

I always tell our people that they're entitled to get answers to every question they have. I let them know I'm not going to defend myself when it comes to their questions, but I will explain what's going on. I also tell them that while they're entitled to answers to every question, that doesn't mean that they're going to like the answers. But it's going to be truthful, and I know they can deal with the truth. This might create additional questions, but we'll get through them. And we do.

I also don't think it's right for leaders to withhold the truth hoping to get the timing just right or trying to benefit from a big splash with the news. They owe it to their people to get the truth out to them as quickly as possible—and I mean absolutely as quickly as they possibly can. You're not going to build trust if you don't do this. You're not going to motivate and inspire people if you don't. You're not going to be an effective leader if you don't. I don't care how bad the news may be, you've got to treat your people like the adults they are and provide them with the information they need to make their own decisions. It sounds simple, but it requires discipline and action.

At Umpqua, we've completed many acquisitions over the years. One of the first steps I take after a transaction is official is to call a town-hall meeting where I address everyone in the company we've just acquired. I know that the people in these organizations are anxious and nervous. They have questions about what's going to happen, both to their organization and to them personally. During these meetings, we introduce ourselves, explain the next steps in the integration process, and allow our new associates to get a peek into the Umpqua culture and what it stands for—and what it will mean to them. I also make a point of quickly getting to the question, “What's going to happen to me?” because I realize that until I do, they're not really listening to anything else we have to say. They want—and need—to know the answer to, “What about me?”

I know that there's a chief auditor somewhere in the room thinking, “Ray, your company already has a chief auditor, and I have that position here. You don't need two of us, do you? Am I going to be the one who lands on your layoff list?” At Umpqua, we've taken a clear position with our staff when the issue of layoffs comes up—whether in an acquisition, department consolidation, or simple organizational changes—that we have no plans to eliminate people from the organization. Our approach, which we explain in detail to our new employees, is that, yes, there will be job redundancies resulting in position eliminations. However, those are positions, not people. If it turns out that your job is going to be eliminated, we want you to apply for one of the 150 open positions that we're recruiting for—and hope that among all those vacancies, you'll find something that works for you.

We're truthful with people. We put everything on the table, and we let them deal with the fallout in whatever manner they choose. By being absolutely truthful, you will be helping your people get answers to their questions. As an added benefit, you'll also be helping them find their way through these uncertain times.

The Conference Board Review is the quarterly magazine of The Conference Board, the world's preeminent business membership and research organization. Founded in 1976, TCB Review is a magazine of ideas and opinion that raises tough questions about leading-edge issues at the intersection of business and society.